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There is one piece of received wisdom in this article which is particularly problematic: "But managing a multinational firm such as Walmart requires a different

There is one piece of received wisdom in this article which is particularly problematic: "But managing a multinational firm such as Walmart requires a different—and much rarer—set of skills than that required to run a corner store." This is simply not true. Executive skill is very highly overrated. There is no "magic" these overpaid executives have that uniquely enables them to run large companies. This received wisdom probably comes from the efficient-market hypothesis, in the sense that if executives are paid so highly it must be that there skills are amazing and valuable. This need not be true. It may very well be due to a mix of cronyism, posturing, and self-promotion. Let's end this nonsense of executives being the crème de la crème of intellectual superiority.

vannevar 12y ago
Yes, this is an excellent point which has application in many contexts. We simply don't know how rare the skills are, because the positions are so rare. There might be 100 million people who could do the job at Walmart, but there are not 100 million Walmarts. There aren't even 100 million paths to get to the CEO position, and while there is certainly some economic Darwinism at play in determining who gets on those paths, I suspect that it's overwhelmed by noise as people carom around the socio-economic network like the balls in a lottery machine.
PaulHoule 12y ago
One area where executives are exceptional is in social skills. You have to know how to get instant trust from just about anybody, and when they are talking with anyone they can make that person feel important. You also need to never decompensate under pressure. Other than that there aren't any specific job requirements, you could be the CEO of a company like General Motors and not know a lot about cars because you've got plenty of people around you.
- jessaustin 12y ago
  You might be right, but the social skills you've described don't sound all that valuable to either the firm or society as a whole. We would benefit from a model for the organization of investment that doesn't promote these particular individuals to the top.
  - nostrademons 12y ago
    The social skills are a necessary (but not sufficient) part of the real skillset of a successful executive: being able to navigate a number of contradictory desires from various stakeholders, and then quickly make decisions that piss off the fewest number of important stakeholders. People who have only logical/analytical skills usually fail because they're blind to the emotional realities of the people they deal with. They may be able to make great decisions - when all of the trade-offs are carefully spelled out for them. But when you're CEO, the vast majority of important information is unstated, in how people feel about a course of action, and developing those social skills is necessary for quickly taking the emotional temperature of a room and understanding what people really desire, how much they desire it, and what you can do to make them happy. Conversely, people with only social skills get paralyzed by decision-making when thousands of people are involved. They want to make the people closest to them happy, which means pissing off a lot of people who aren't complaining now but soon will be. That's the "difference between the corner store owner and Walmart CEO" that the article is talking about. The best executives I've seen manage to combine deep emotional intelligence with deep intellectual intelligence. They can both quickly understand how everyone is going to feel about a decision (including, particularly, how the people who are going to be hurt by it will feel), and then select a course of action that minimizes the hurt and maximizes the benefit, understanding all the time that some people (often, many people) will be pissed off at them.
- blackbagboys 12y ago
  Is there evidence supporting this, or is it simply something you'd want to have in the platonic ideal of an executive (genuine question, not an attempt to be snarky)? I certainly have never been inspired to place an overabundance of trust in any of the executives I've toiled for.
sliverstorm 12y ago
Are executives god-men? Probably not, but I suspect, as is often the case, the job seems a lot easier than it actually is. I find engineering types are especially prone to underestimating the difficulty of other jobs, and we have very little context to evaluate executives who have very little overlap with engineering.
- pnathan 12y ago
  > the job seems a lot easier than it actually is. This is the general case. Wish more people thought humbly about other positions besides theirs.
at-fates-hands 12y ago
>>> This is simply not true. Executive skill is very highly overrated. There is no "magic" these overpaid executives have that uniquely enables them to run large companies. To some degree I agree with you. Some of the most profitable companies I've worked for have very shrewd CEO's. I worked at a bike shop when I was still in college (Eriks Bike Shop). The guy started his business when he was 14. When I worked there, he still only had around 10 stores. One of the smartest things he did was get real estate in smaller areas, off the beaten path and grow his customer base. Once he had a big chunk of the market, he'd close those stores and open a bigger shop right off the highway, near the old store. He also had a very close knit group of people at the top. As far as a I know, it's still just him, the VP of sales, the head IT guy and one other guy. Less than 6 guys effectively now run 22 shops in two states and do multi-millions in sales every year. Erik never went to college, and started this right out of high school. A good example of someone without the groomed skills you're talking about. The other places I've worked, like most of the bigger fortune 500 companies, they usually had Ivy Leaguers who either had PhD's in either business or economics or both. To me, these skills aren't overrated. If you've gone to Yale for 8-10 years and have a PhD in Business Management, then yeah, you have skills which most people will never have. As such, they have certain abilities and insight most other people don't. To me this makes them uniquely qualified to run large businesses. Not just their degree, but also the market and business insight expertise is crucial. Sometimes I don't think you just get that from working in a certain industry for a certain period of time.
- stolio 12y ago
  Sounds like your bike shop friend as an incredibly rare skill-set to pull that off. Out of a million people how many of them could start a successful chain while still a teenager, even with great luck?
  - jsprogrammer 12y ago
    Is there really room for one million people to have a chain store? Who would shop at all of those chains? It's like the pyramid schemers (I mean network marketers) who make claims about how you too can have all that sweet passive income. No, the structure only allows for a small percentage of the overall population to sit at the top, no matter how 'lucky' or 'skilled' an individual is.
brd 12y ago
Executive only needs to do a few things well but the reality is VERY few people can do those things well. A good executive turns people into tools. You offload your problems into the minds of others and then efficiently recoup the outputs. This is far more difficult to do well than one might think. The sheer volume of things that need to be orchestrated and then mentally cataloged when you operate at that level is overwhelming for most people.
- nostrademons 12y ago
  It's more than that - a good executive turns people into tools while at the same time making each of them feel like they're a beautiful, unique, snowflake whose contributions are highly valued. People don't do their best work when they feel like mere tools.
- wfo 12y ago
  What? Has anyone ever met an executive? They are abusive, power-hungry, and ruthless. Our tech folk hero Jobs is a perfect example. Their power and salaries inspire at best fear and at worst resentment and contempt. They do their best when they step back and let experts do real work, taking care of the administrative and management details so people with real skills don't have to. They climb corporate power structures because corporate power is what's important to them and they've learned how to get it. I recognize this is all anecdotal but the outpouring of anecdotal executive-sympathy in this comment thread is mind-boggling; a little push back in the other direction seems not out of line.
  - stolio 12y ago
    ....you do realize that Steve Jobs built the power structure he sat on top of, that it floundered when they pushed him out in the 80's, then became successful again when they hired him back in the 90's?
  - lazyjones 12y ago
    > Our tech folk hero Jobs is a perfect example. Their power and salaries inspire at best fear and at worst resentment and contempt Jobs' annual salary was $1 from 1997 until his death. Just saying ...
pdeuchler 12y ago
Oh please, everyone thinks they could do a better job until they actually end up on top. 90% of being a leader isn't necessarily having a specific skill or specific domain knowledge, it's about having the courage to make unpopular decisions, dealing with the fallout alone, and leading by example when the going gets tough.
- coderzach 12y ago
  You're right, that's why we should hire the sugar water CEO to run this tech company. \s
- eli_gottlieb 12y ago
  >90% of being a leader isn't necessarily having a specific skill or specific domain knowledge So you're saying there's a broad class of people who can do the job well rather than a tiny clique?
  - pdeuchler 12y ago
    You didn't read the second half of that sentence, did you?
    - s73v3r 12y ago
      In many cases, the second half of the sentence never really happens.
- zenogais 12y ago
  90% of develop skills is trial and error. So in this sense it's not really any different or particularly difficult, I'm certain most people would do ok at it given enough trial and error experience.
- waterlesscloud 12y ago
  "it's about having the courage to make unpopular decisions, dealing with the fallout alone, and leading by example when the going gets tough." Most executives do none of these things.
e40 12y ago
I would suggest ruthlessness is the key to running something like Walmart as successfully as they run it. If the people in charge were much less ruthless, it would be a less profitable enterprise.
urda 12y ago
> Let's end this nonsense of executives being the crème de la crème of intellectual superiority. Right, but let's not pretend that executives are just you're "everyday folk". It still takes a specific set of skills, excellent interpersonal ability, leadership, drive, and a few others. It isn't a walk in the park, show up 9-5, and earn a nice paycheck. So don't be so quick to just "write executives off". Odds are they have a lot more going on than one may think.
malandrew 12y ago
Interestingly I'd attribute the ability for firms to grow ever larger to engineering. There have been more and more improvements over the past 5-10 years that allow a decoupling between business groups so they can work effectively together with fewer coordination costs. Basically everything SOA, means business units are easier to manage because the interfaces they consume from other business units are better standardized and the tools to consume them are better. Basically, executives aren't getting better. The tools that the employees that work for those executives are, so much so that the employees no longer need to go through the command and control hierarchy to get things done across business units. See: Steve Yegge's Amazon Platform Rant: https://plus.google.com/+RipRowan/posts/eVeouesvaVX https://plus.google.com/+RipRowan/posts/eVeouesvaVX Google Protobufs https://code.google.com/p/protobuf/ https://code.google.com/p/protobuf/ Facebook's Thrift https://thrift.apache.org/ https://thrift.apache.org/ ... and all the other SOA enabling technologies the reduce transaction costs* stemming from coordination. * http://www3.nccu.edu.tw/~jsfeng/CPEC11.pdf http://www3.nccu.edu.tw/~jsfeng/CPEC11.pdf

vannevar 12y ago

Yes, this is an excellent point which has application in many contexts. We simply don't know how rare the skills are, because the positions are so rare. There might be 100 million people who could do the job at Walmart, but there are not 100 million Walmarts. There aren't even 100 million paths to get to the CEO position, and while there is certainly some economic Darwinism at play in determining who gets on those paths, I suspect that it's overwhelmed by noise as people carom around the socio-economic network like the balls in a lottery machine.

PaulHoule 12y ago

One area where executives are exceptional is in social skills. You have to know how to get instant trust from just about anybody, and when they are talking with anyone they can make that person feel important. You also need to never decompensate under pressure. Other than that there aren't any specific job requirements, you could be the CEO of a company like General Motors and not know a lot about cars because you've got plenty of people around you.

jessaustin 12y ago
You might be right, but the social skills you've described don't sound all that valuable to either the firm or society as a whole. We would benefit from a model for the organization of investment that doesn't promote these particular individuals to the top.
- nostrademons 12y ago
  The social skills are a necessary (but not sufficient) part of the real skillset of a successful executive: being able to navigate a number of contradictory desires from various stakeholders, and then quickly make decisions that piss off the fewest number of important stakeholders. People who have only logical/analytical skills usually fail because they're blind to the emotional realities of the people they deal with. They may be able to make great decisions - when all of the trade-offs are carefully spelled out for them. But when you're CEO, the vast majority of important information is unstated, in how people feel about a course of action, and developing those social skills is necessary for quickly taking the emotional temperature of a room and understanding what people really desire, how much they desire it, and what you can do to make them happy. Conversely, people with only social skills get paralyzed by decision-making when thousands of people are involved. They want to make the people closest to them happy, which means pissing off a lot of people who aren't complaining now but soon will be. That's the "difference between the corner store owner and Walmart CEO" that the article is talking about. The best executives I've seen manage to combine deep emotional intelligence with deep intellectual intelligence. They can both quickly understand how everyone is going to feel about a decision (including, particularly, how the people who are going to be hurt by it will feel), and then select a course of action that minimizes the hurt and maximizes the benefit, understanding all the time that some people (often, many people) will be pissed off at them.
blackbagboys 12y ago
Is there evidence supporting this, or is it simply something you'd want to have in the platonic ideal of an executive (genuine question, not an attempt to be snarky)? I certainly have never been inspired to place an overabundance of trust in any of the executives I've toiled for.

sliverstorm 12y ago

Are executives god-men? Probably not, but I suspect, as is often the case, the job seems a lot easier than it actually is. I find engineering types are especially prone to underestimating the difficulty of other jobs, and we have very little context to evaluate executives who have very little overlap with engineering.

pnathan 12y ago
> the job seems a lot easier than it actually is. This is the general case. Wish more people thought humbly about other positions besides theirs.

at-fates-hands 12y ago

>>> This is simply not true. Executive skill is very highly overrated. There is no "magic" these overpaid executives have that uniquely enables them to run large companies. To some degree I agree with you. Some of the most profitable companies I've worked for have very shrewd CEO's. I worked at a bike shop when I was still in college (Eriks Bike Shop). The guy started his business when he was 14. When I worked there, he still only had around 10 stores. One of the smartest things he did was get real estate in smaller areas, off the beaten path and grow his customer base. Once he had a big chunk of the market, he'd close those stores and open a bigger shop right off the highway, near the old store. He also had a very close knit group of people at the top. As far as a I know, it's still just him, the VP of sales, the head IT guy and one other guy. Less than 6 guys effectively now run 22 shops in two states and do multi-millions in sales every year. Erik never went to college, and started this right out of high school. A good example of someone without the groomed skills you're talking about. The other places I've worked, like most of the bigger fortune 500 companies, they usually had Ivy Leaguers who either had PhD's in either business or economics or both. To me, these skills aren't overrated. If you've gone to Yale for 8-10 years and have a PhD in Business Management, then yeah, you have skills which most people will never have. As such, they have certain abilities and insight most other people don't. To me this makes them uniquely qualified to run large businesses. Not just their degree, but also the market and business insight expertise is crucial. Sometimes I don't think you just get that from working in a certain industry for a certain period of time.

stolio 12y ago
Sounds like your bike shop friend as an incredibly rare skill-set to pull that off. Out of a million people how many of them could start a successful chain while still a teenager, even with great luck?
- jsprogrammer 12y ago
  Is there really room for one million people to have a chain store? Who would shop at all of those chains? It's like the pyramid schemers (I mean network marketers) who make claims about how you too can have all that sweet passive income. No, the structure only allows for a small percentage of the overall population to sit at the top, no matter how 'lucky' or 'skilled' an individual is.

brd 12y ago

Executive only needs to do a few things well but the reality is VERY few people can do those things well. A good executive turns people into tools. You offload your problems into the minds of others and then efficiently recoup the outputs. This is far more difficult to do well than one might think. The sheer volume of things that need to be orchestrated and then mentally cataloged when you operate at that level is overwhelming for most people.

nostrademons 12y ago
It's more than that - a good executive turns people into tools while at the same time making each of them feel like they're a beautiful, unique, snowflake whose contributions are highly valued. People don't do their best work when they feel like mere tools.
wfo 12y ago
What? Has anyone ever met an executive? They are abusive, power-hungry, and ruthless. Our tech folk hero Jobs is a perfect example. Their power and salaries inspire at best fear and at worst resentment and contempt. They do their best when they step back and let experts do real work, taking care of the administrative and management details so people with real skills don't have to. They climb corporate power structures because corporate power is what's important to them and they've learned how to get it. I recognize this is all anecdotal but the outpouring of anecdotal executive-sympathy in this comment thread is mind-boggling; a little push back in the other direction seems not out of line.
- stolio 12y ago
  ....you do realize that Steve Jobs built the power structure he sat on top of, that it floundered when they pushed him out in the 80's, then became successful again when they hired him back in the 90's?
- lazyjones 12y ago
  > Our tech folk hero Jobs is a perfect example. Their power and salaries inspire at best fear and at worst resentment and contempt Jobs' annual salary was $1 from 1997 until his death. Just saying ...

pdeuchler 12y ago

Oh please, everyone thinks they could do a better job until they actually end up on top. 90% of being a leader isn't necessarily having a specific skill or specific domain knowledge, it's about having the courage to make unpopular decisions, dealing with the fallout alone, and leading by example when the going gets tough.

coderzach 12y ago
You're right, that's why we should hire the sugar water CEO to run this tech company. \s
eli_gottlieb 12y ago
>90% of being a leader isn't necessarily having a specific skill or specific domain knowledge So you're saying there's a broad class of people who can do the job well rather than a tiny clique?
- pdeuchler 12y ago
  You didn't read the second half of that sentence, did you?
  - s73v3r 12y ago
    In many cases, the second half of the sentence never really happens.
zenogais 12y ago
90% of develop skills is trial and error. So in this sense it's not really any different or particularly difficult, I'm certain most people would do ok at it given enough trial and error experience.
waterlesscloud 12y ago
"it's about having the courage to make unpopular decisions, dealing with the fallout alone, and leading by example when the going gets tough." Most executives do none of these things.

e40 12y ago

I would suggest ruthlessness is the key to running something like Walmart as successfully as they run it. If the people in charge were much less ruthless, it would be a less profitable enterprise.

urda 12y ago

> Let's end this nonsense of executives being the crème de la crème of intellectual superiority. Right, but let's not pretend that executives are just you're "everyday folk". It still takes a specific set of skills, excellent interpersonal ability, leadership, drive, and a few others. It isn't a walk in the park, show up 9-5, and earn a nice paycheck. So don't be so quick to just "write executives off". Odds are they have a lot more going on than one may think.

malandrew 12y ago

Interestingly I'd attribute the ability for firms to grow ever larger to engineering. There have been more and more improvements over the past 5-10 years that allow a decoupling between business groups so they can work effectively together with fewer coordination costs. Basically everything SOA, means business units are easier to manage because the interfaces they consume from other business units are better standardized and the tools to consume them are better. Basically, executives aren't getting better. The tools that the employees that work for those executives are, so much so that the employees no longer need to go through the command and control hierarchy to get things done across business units. See: Steve Yegge's Amazon Platform Rant: https://plus.google.com/+RipRowan/posts/eVeouesvaVX https://plus.google.com/+RipRowan/posts/eVeouesvaVX Google Protobufs https://code.google.com/p/protobuf/ https://code.google.com/p/protobuf/ Facebook's Thrift https://thrift.apache.org/ https://thrift.apache.org/ ... and all the other SOA enabling technologies the reduce transaction costs* stemming from coordination. * http://www3.nccu.edu.tw/~jsfeng/CPEC11.pdf http://www3.nccu.edu.tw/~jsfeng/CPEC11.pdf